This is your SolarWakeup for July 8th, 2020

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59th Largest IOU. The combination of Sunrun and Vivint Solar, from hereon out called Sunrun will have over 500,000 residential customers. According to EIA, that makes Sunrun the 59th largest investor owned ‘utility’ nestled between Duke Energy South Carolina and Pacificorp. For reference, it is 1/7th the size of PG&E and 1/9th Florida Power & Light which sits at 4.3million customers. At the point of IPO, Sunrun had 80,000 customers and adds about 40,000 customers per year. In comparison, many of you residential solar installers are considering yourself huge when you reach 1,000 installs per year, something less than 50 companies in the US can say.

Installer Trivia. Sunrun will be the largest by far followed by other public companies, Tesla and SunPower. Can you name the next largest installer measured by number of permits pulled?

Management Talking Points. The companies hosted a conference call yesterday morning led by Lynn Jurich (CEO), Ed Fenster (Executive Chairman) and Tom vonReichbauer (recently new CFO of Sunrun) joined by CEO of Vivint Solar, David Bywater. The call started with highlights of the synergies and complementary nature of combining the companies. Sunrun is adding direct to home sales engine and the combination will save $90million in overhead. Wall Street analysts are focused on the $90million in cost synergies which was frustrating for me on the call because it misses the larger point. The combination is 500,000 customers and while the company isn’t focused on the ability to add storage to those customers, it remains an asset. Behind the scenes analysts tend to view the deal in a positive light. The optimism comes in the form of short-term, refinancing the debt of the entire portfolio, and longer term partnering with low cost of capital, pension fund type, investors to create a competitive edge. The real value and reason for scale is that the residual income that the general partner (Sunrun) can create from these portfolios could be enough to fund the overhead of the platform. That would bring Sunrun into the public company glory land of positive earnings per share. More to come on this, particularly from financial analysts.

The Nodal Impact. Most regulatory risk will talk about antitrust approvals, I don’t worry about that especially since Sunrun and every solar installer compete against electric utilities which are you know, monopolies. Also not a risk, but interesting to talk about is what happens when Sunrun and solar companies in general control energy storage all over the residential grid. Imagine Sunrun with 500k storage units across the Country, will utilities ask regulators to oversee that control? Nationally it’s diverse enough but think about it at a nodal level.

IPO To Quasi-Merger. In 2014, Vivint Solar went public with my writeup on the S-1 and in June of 2015, Sunrun filed its S-1. A month later, Sunedison entered into terms with Vivint Solar to acquire the company for $2.2Billion. It has taken exactly 5 years from that moment for the Utah based company to enter into a new agreement. This all-stock acquisition feels a bit more like a merger to me but now you have the fruits of over a decade of labor. Someone could and should write a book about Sunrun from the early days of resi solar, lots of fun stories involving startups, SolarCity, race cars, rocket ships and of course American Idol. This feels like a summit of sorts, but we know that much more work is to be done by the industry.

Pipelines And Politics. A lot of talk about pipelines this week and how the potential Biden presidency impacts the development of those. That logic is flawed. Pipelines are financial investments that span decades, you need a consistency of policy not a momentary positive followed by a negative. Even if the next decade only feature republican presidents, would pipelines continue to be built? The trend on this is the direction away from the fossil fuels in oil and gas pipelines and towards transmission, especially HVDC. The trend line is more important than the election.

Nonprofits Want Solar Too. My friends at CollectiveSun can help you sell more solar to nonprofits. By working with CollectiveSun your nonprofit prospects get easy $0 down financing and a 12% or more tax-like credit for their systems. Now, more than ever, solar can help nonprofits save on their critical operating expenses. If you are a solar installer or developer, this is a great solution for you to sell more solar and ignite more deals with nonprofits. Click here to learn more about working with CollectiveSun.

Opinion

Best, Yann